CGNPC eyes $2.2 billion Extract bid after Kalahari deal
Fri, Dec 09 07:46 AM EST By James Regan
SYDNEY (Reuters) - China Guangdong Nuclear Power Corp (CGNPC) will offer $2.2 billion for Australia's Extract Resources (EXT.AX) if its agreed deal to buy Extract's top shareholder proceeds, a move that could kick off a bidding war for one of the world's largest uranium discoveries.
CGNPC issued details of the proposed offer late on Thursday after it agreed to buy Kalahari Minerals (KAH.L), the top shareholder in Extract, for $990 million.
CGNPC, which has been seeking new sources of uranium supply, wants to buy Kalahari for its 42.7 percent interest in Extract (EXT.TO), which owns the Husab uranium project in Namibia.
Husab is potentially the second-largest uranium mine in the world and has also attracted the attention of sector heavyweight Rio Tinto (RIO.AX) (RIO.L). Rio holds 14 percent of Extract's shares and 11.5 percent of Kalahari.
Under Australian rules, CGNPC is required to make a full takeover offer once it owns more than 20 percent of Extract, but the securities regulator can grant exceptions.
Shares of Extract Resources rose 41 cents to A$8.50 a share after coming off a trading halt, 5 percent above its last trade before the halt, but still under the A$8.65 per share value placed on the company by CGNPC, a state-owned Chinese entity.
The stock last traded above A$8.65 on Oct 10, according to Reuters data.
Rhys Bradley, an analyst for stockbrokerage Patersons, said he was maintaining a A$9.53 per share target on Extract given the potential for a counterbid by Rio, which already majority owns Namibia's nearby Rossing uranium mine.
"The best situation is for Rio to be that other party that comes along and makes a bid," Bradley said. "That's why we are keeping our target price for Extract at A$9.53."
SUPLIES SOUGHT
Despite concerns uranium consumption would suffer following the Fukushima nuclear disaster in Japan last March, potential new sources of supply are garnering widespread interest.
Rio last week succeeded in its C$654 million ($646.50 million) takeover of Canadian uranium prospector Hathor (HAT.TO) after Cameco Corp (CCO.TO) withdrew a rival offer. [ID:nWNAS4963]
Rio is also helping underwrite an A$500 million share issue to fund exploration work at Energy Resources Australia (ERA.AX), which it majority owns.
Other possible suitors include BHP Billiton (BHP.AX), which is in the early stages of investing an estimated $20 billion-$30 billion to expand its Olympic Dam mine, which would include quadrupling uranium production.
"The independent directors of Extract are working carefully to assess the details of the proposed offer and will consider all available alternatives for maximizing shareholder value," Extract's chief executive, Jonathan Leslie, said in a statement.
"Since the initial announcement of talks between Kalahari and CGNPC, we have sought to ensure that Extract shareholders would be protected if an offer was to be made for Kalahari," he said.
Exploration work is continuing on the Husab project, with an updated resource estimate due next year.
Extract said it had not been party to the negotiations over the Kalahari offer or the proposed Extract offer, including the offer price.
The proposed offer price of A$8.65 for Extract is derived from the $990 million agreed cash offer for Kalahari. Analysts had earlier estimated an offer for Extract would be worth a minimum A$8.75 and A$9 a share.
An offer by CGNPC for Extract was conditional on Kalahari extracting agreements for at least 50 percent of Kalahari's shares. It holds letters of intent from investors for about 3.9 percent.
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